Berkshire Hathaway 2017 Annual Meeting Audience Question # 52

Warren and Charlie talks about the importance of learning

Warren Buffett:

Station 6?

Audience Member:

Good afternoon. My name Sally Burns. I’m from Australia. But I currently reside in Austin, Texas.

My question, Mr. Buffett, I have heard that Mr. Munger says your greatest talent is that you’re a learning machine, that you never stop updating your views.

What are the most interesting things you’ve learned over the last few years?

Warren Buffett:

Well, it is fun to learn. I would say Charlie is much more of a learning machine than I am. I’m a specialized one, and he’s a much… he does as well as I do in my specialty. And, then, he’s got a much more general absorption rate than I have about what’s going on in the world.

But, you know, it’s a world that gets more fascinating all the time. And a lot of fun can occur when you learn you were wrong on something. It… you know, that’s when you really learn that the old ideas really weren’t so correct. And you have to adapt to new ones. And that, of course, is difficult.

I don’t know that I would pick out… well, I think, actually, what’s going on, you know, in America is terribly, terribly interesting, you know, and politically, all kinds of things. But just the way the world’s unfolding, it’s moving fast.

I do enjoy trying, you know, to figure out not only what’s going to happen, but what’s even happening now. But I don’t think I’ve got any special insights that would be useful to you. But maybe Charlie does.

Charlie Munger:

Well, I think buying the Apple stock is a good sign in Warren.

And he did run around Omaha and ask if he could take his grandchildren’s tablets away.

And he did market research.

And I do think we keep learning. And more important, we keep… we don’t unlearn the old tricks.

And that is really important.

You look at the people who try and solve their problems by printing money and lying and so forth.

Take Puerto Rico. Who would’ve guessed that a territory of the United States would be in bankruptcy? Well, I would’ve predicted it because they behave like idiots. And so…

Warren Buffett:

And we did not buy any Puerto Rico bonds.

Charlie Munger:

No. And if you go to Europe… you go to Europe, you should look at the government bond portfolios we’re required to hold in Europe. There’s not only no Greek bonds, they’re the bonds of nobody but Germany.

Everywhere you look in Berkshire, somebody is being sensible. And that is a great pleasure.

And if you combine that with being very opportunistic so that when something comes along like a panic, why, it’s a nice… it’s like playing with two hands instead of one on a game that requires two hands.

It helps to have a fair-sized repertoire.

And, Warren, we’ve learned so damn much. There are all kinds of things we’ve done over the last 10 years we would not have done 20 years ago.

Warren Buffett:

Yeah. That’s true, although if you take… it’s interesting. I’ve mentioned this before. But one of the best books on investment was written, I think, in 1958. I think I read it around 1960, by Phil Fisher, called Common Stocks and Uncommon Profits (you can get a copy of the book here). And he told…

Charlie Munger:

All the countries went… companies went to hell eventually.

Warren Buffett:

But it talked about the importance, I mean, or the usefulness of, what do you call, the “scuttlebutt method.” And, you know, that was something I didn’t learn from Graham.

But every now and then, it’s turned out to be very useful. Now, it doesn’t solve everything. And, I mean, there’s a whole lot of more…

Charlie Munger:

I saw you do it with American Express in the Salad Oil scandal.

Warren Buffett:

Yeah, yeah.

Charlie Munger:

You’re still doing at Apple, you know, decades later.

Warren Buffett:

Yeah. It… in certain cases, you actually can learn a lot just by asking a lot of questions. And I give Phil Fisher credit. That book goes back a lot of years.

But as Charlie said, some of the companies he picked as winners forever did sort of peter out on him.

But the basic idea, that you can learn a lot of things just by asking in some cases… I mean, I used to…

I mean, if I got interested in the coal industry… just say to pick one out of the air… you know, when I was much younger, more energetic, if I went and talked to the heads of 10 coal companies and I asked each one of them… way later into the conversation, after they got feeling very… they felt like talking.

And I would just, you know, I’d just say, “If you had to go away for 10 years on a desert island and you had to put all of your family’s money into one of your competitors, which one would it be and why?”

And then, you know, and then I’d ask them if they had to sell short one of their competitors for 10 years, all their family money, why?

And they… everybody loves talking about their competitors. And if you do that with 10 different companies, you’ll probably have a better fix on the economics of the coal industry than any one of those individuals has.

I mean, the… it… there’s ways of getting at things. And sometimes they’re useful. Sometimes, they’re not. But sometimes, they can be very useful.

And, you know, the idea of just learning more all the time about…

I’m more specialized in that by far than Charlie. I mean, he wants to learn about everything.

And I just want to learn about something that’ll help Berkshire.

But… it’s a very, you know, it’s a very useful attitude toward… have toward… the world.

And, of course, I don’t know who said it. But somebody said the problem is not in getting the new ideas but shedding the old ones. And there’s a lot of truth to that.

Charlie Munger:

We would never have bought ISCAR if it had come along 10 years earlier. We would never have bought Precision Castparts if it had come along 10 years earlier. We are learning. And, my God, we’re still learning.

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